Most early stage VC deals fall through due diligence – TechCrunch


Here’s what investors look for when writing their first check to a startup

Covering five flutes It makes me wonder how the company is going to demolish and demolish the deck that raised $1.2 million in seed. do Do investors decide to invest in the company in the early stages?

VC firm Baukunst led the five-flute investment, and I sat down with Axel Bichara and Tyler Mince to discuss how they evaluate an early-stage deal. Most of the deals they look at fall through the cracks of due diligence and it gave me an inside look at what the process is like.

“Collective wisdom creates mediocrity. That’s not helpful. In VC, we’re looking for the outside.” Axel Bichara, Co-Founder and General Partner, Architecture

“The decision to hold a second meeting is one of the biggest decisions in venture capital, because from then on [moment] In the future, you’re taking a significant amount of time,” said Bichara, who explained that in his experience, they invest in one of 250 deals or just look at them. Only about 1 in 40 first meetings lead to a second meeting. “Whatever you do after the first meeting, I consider due diligence. They are evaluating the founders. When we invest, most of our due diligence focuses on two things: the quality of the startup and the size/attractiveness of the market opportunity. If you get the two right, everything falls into place, almost literally.

Once you have the right team and a big market, everything can be figured out, Bichara argued. If you have a good “founder-market fit,” you’re out to compete.

“The right founding team will do the right thing [in that case]. They will work well, and there will be capital saving market opportunities. You come in with a competitive advantage, position and scale then get it. If you don’t get a good ‘yes’ from those two, you shouldn’t invest,” Bichara explained. “The real hard work you do is focused on answering those two questions.”

In Baukunst’s case, the company’s investment thesis means that for an investment to make sense, a startup must have at least $1 billion or more in revenue—which means the market opportunity must be large enough to make that possible. If the founding team is well done.

“Then you work backwards, and our due diligence will support that,” Bichara said.



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